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Bar Talk
31 January, 2003  
The chase for the Cummins' loot...

May 26-28 set for next round in trustees’ struggle to prise loot out of John Cummins’ estranged wife


She had it Cummin

Mary Cummins will be back in court between May 26 and 28 for the next round in her struggle to prevent Max Prentice, John Cummins’ trustee in bankruptcy, from getting his paws on a large slab of “her” money.

Since John Cummins was struck off and had the silk gown torn from his heaving milk-white shoulders he and Mary have lived apart. He’s said to be with his brother at Harbord, although he’s also been sighted near rooms in Sutherland Street, Paddington. Mary is in new digs at the old Women’s Hospital, also in Paddington.

The principal matter before Justice Sackville in the Federal Court just before Christmas concerned the transfer of Cummins’ principal assets – his half of the matrimonial home to Madam Mary and his shares in Counsel’s Chambers Ltd which entitled him to a “double room” in Wentworth Chambers to the Cummins Family Trust in August 1987.

These transactions took place 13 years before he declared himself bankrupt in 2000.

Last year the family home at Hunters Hill was sold for over $2 million and the chambers for over $400,000. The money is sitting in trust pending the outcome of the proceedings brought by Max Prentice on behalf of Cummins’ creditors, the most pressing of which is the Australian Taxation Office.

Max’s action is against Mary, her hospitality and “events management” business Hospitality Hire Pty Ltd and the Cummins family trust company, Aymcopic Pty Ltd.

The hearing in May will also examine a total of $138,000 that was lent by Cummins to his missus and whether that too should be available to the creditors.

It is well known that Cummins did not lodge an income tax return for 45 years. He currently owes the Australian Taxation Office a sobering $955,672.92, and that’s just on the tax returns he did file in 2000 for the period 1992 to 1999.

In his judgment of December 5, 2002, Justice Sackville professed to be somewhat startled by “the fact that the ATO seems to have done nothing about the bankrupt’s failure to lodge income tax returns until the late 1990’s”.

The respondents played Russian Roulette and made a “no case” submission, saying the trustees’ evidence was insufficient to make out a case that Cummins’ “main purpose” in the transfer of his assets was to defeat his creditors. They “elected” to call no evidence and so Mary and the companies stood or fell on the strength of the trustees’ evidence.

They fell, because Sackville decided that despite some gaps in the trustee’s case, it was strong enough to establish that old “JC, QC, AJC’s” main purpose in making those transfers in 1987 was to prevent those assets being divisible among any creditors.

When the proceedings get going again in May Mary Cummins will be bound by her election not to call evidence concerning the transfers.

Justice Sackville had little trouble inferring Cummins’ “main purpose”, despite the paucity of documentation and lack of witnesses to the 1987 transactions.

Referring to notes made by Barry Harris, the solicitor who arranged the transfers, Sackville said:

“These notes, although cryptic and incomplete, show that the solicitor paid attention to the possible application of s.121 of the Bankruptcy Act (which at that time was concerned with dispositions of property ‘with intent to defraud creditors’) and its State counterpart, namely s.37A of the Conveyancing Act 1919 (NSW).”

There was also the small but significant fact that no actual money changed hands as part of the transfers. The “expressed price” of the half share in the matrimonial home was $205,250. For the transfer of his shares in Counsel’s Chambers Ltd to Aymcopic Pty Ltd the price was “expressed” at $360,000. Mary paid nothing and the trust company paid nothing.

Justice Sackville roundly dismissed the submission by counsel for Madam Cummins and Aymcopic that Cummins transferred the assets in 1987 because of “concern that the High Court was about to abrogate the in-court immunity of barristers from professional negligence actions”.

As the judge noted, the dates just didn’t gel. Cummins’ instructions to Harris to prepare documents for the transfers were given prior to the High Court granting special leave to appeal the Full Court of the Supreme Court of Victoria’s decision upholding barristers’ in court immunity. (See Wraith v Giannarelli 1988).

In the final analysis, Sackville simply couldn’t escape what he called “one overriding factor”, namely: ”.... that by August 1987 the bankrupt had not lodged a tax return for over thirty years.”

He continued:

“It is also relevant that the bankrupt must have been aware not only that he was contingently liable to pay income tax due in respect of many years of income, but that failure to lodge tax returns when required by law to do so constituted a criminal offence. He must also have realised that once his tax delinquency was discovered and revealed, he was at risk of professional disgrace and loss of his right to practise as a barrister. Moreover, the bankrupt plainly had no intention of ‘coming clean’ in 1987 (it was to be another twelve years before he lodged any tax returns)...”

Sackville summed up his findings thus:

“I am satisfied that:

the bankrupt was well aware in August 1987 that he had incurred very substantial liabilities to the [Australian Taxation] Commissioner, contingent only on the commissioner issuing assessments in respect of past income years; the bankrupt was well aware at that time that the commissioner would issue assessments once the bankrupt’s longstanding tax delinquency became known, an event that could occur at any time; the bankrupt divested himself voluntarily of virtually all his substantial assets in August 1987; in any event, the assets retained by the bankrupt were not sufficient to meet his taxation liabilities, if the commissioner decided to issue assessments; and the bankrupt saw the transfers as increasing the chances that his assets would be protected from any claims made by the commissioner.”

Justice Sackville was also highly critical of Cummins’ absence from the witness box. Stand by for the next bloody round in May.